
Estée Lauder To Acquire Deciem At $2.2B Valuation
UNITED STATES — American multinational manufacturer and marketer of prestige skincare, makeup, fragrance and hair care products,  The EstĂ©e Lauder Cos. Inc. has agreed to buy a majority stake in Deciem, the parent company of popular skin care brand The Ordinary, at a $2.2 billion valuation.
Lauder already owns a 29 percent stake in Deciem after investing in 2017. Under the terms of the deal, Lauder is paying $1 billion to increase its ownership position to 76 percent, valuing the company at $2.2 billion. In three years, Lauder plans to buy the rest of the company at a to-be-determined valuation.
âIt felt like the right time from our people, our brand, our infrastructure. We feel like itâs a time where they can really come in and offer access to different resources that can strengthen where we are today, but we are so strong in our identity and in our culture that it wonât be overtaken by big corporate,â said Deciem chief executive officer Nicola Kilner in an interview.
For 2020, Deciem nearly doubled sales, to about $460 million. The bulk of sales come from The Ordinary, known for affordable skin care products including Niacinimide 10% + Zinc 1%, $5.90, and AHA 30% + BHA 2% Peeling Solution, $7.20.
âDeciem is an exceptional company. Nicola and her team have built and cultivated authentic brands with highly effective, must-have products using a vertically integrated model, and have fostered a uniquely transparent and engaging communication style. The companyâs hero products, desirable innovation and digital- and consumer-first high-touch approach have been instrumental to its success,â said Fabrizio Freda, Lauderâs president and CEO, in a statement.
Kilner will report in to Stéphane de la Faverie, group president at Lauder. Several Deciem executives will retain ownership during the next three years.
âThe business has got to a really good place where we still have so much of the creativity, and thatâs largely because so many of the founding team are still at Deciem today. Weâve been really lucky to retain our people,â Kilner said, noting that Deciem leaders, including herself, chief scientific officer Prudvi Kaka, and chief operating officer Stephen Kaplan would remain in their roles.
Deciem plans to draw on Lauderâs expertise in global expansion to consider entering markets where there is demand, like India and the Middle East, Kilner said. The company also plans to consult with Lauder on regulatory requirements related to those moves, as well as inventory and infrastructure, she said.
âItâs hard to find that balance between a start-up that needs to have the space to flourish and build its own identity and do everything by itself, and then there also comes the point where you become a much bigger brand â it feels like it happens overnight â and you kind of need a bit of help now and again,â Kilner said.
Deciemâs growth for 2020 was driven by expansion with Ulta Beauty and with Sephora online. The company trained store workers to be online consultants, which helped drive up basket size for online orders.
For 2021, Deciem will continue expanding with Ulta and Sephora, including their partnerships with Target and Kohlâs, respectively, and will also expand in Europe with Douglas and Sephora, Kilner said. The business is working to become B Corp. certified.
Deciem is also considering launching more color cosmetics products following the introduction of The Ordinaryâs concealers, and the business plans to put more resources toward high-end skin care line Niod and hair care brand Hif.
âOur hair care sku within The Ordinary is within our top three sellers now. Our Hair Density Serum has gone viral on TikTok,â Kilner said.
The business may also launch new brands going forward, Kilner said. The original idea, in line with the name, was to introduce 10 lines. Right now, Deciem has six brands: The Ordinary, Niod, Hylamide, the Chemistry Brand, Hif and Loopha.
âWe still want to be an incubator,â Kilner said, noting that The Ordinaryâs rapid growth diverted resources from other projects.
Asked if Deciem is on track to become a billion-dollar brand â a status a handful of brands at Lauder have reached â Kilner said that was the goal.
âThatâs definitely where weâd like to get to,â Kilner said. “You donât see us doing any advertising, we donât do any of the traditional things. Itâs mainly just grown through word of mouth and organic and through some distribution expanding.”
âBy the time we even do the things that are planned, I can see hopefully quite a significant growth continuing to come our way,â Kilner said.
By valuation, Deciem is Lauderâs largest acquisition to date. The company paid $1.1 billion to take over the rest of Dr. Jart+ at a $1.7 billion valuation in 2019, and paid $1.45 billion for Too Faced in 2016. Lauder said it expects the Deciem deal to have a ânegligibleâ impact on fiscal 2021 results.
Kilner said she does not anticipate the acquisition will shift Deciemâs culture, which has always been close-knit. âThey recognize the things that we do differently and that that really works for us,â she said.
âThey invested, they kind of watched our journey, which has been a bit of a roller coaster. When we had highs, they supported us. They supported us when we had our lows,â Kilner said.
Perella Weinberg Partners advised Lauder on the deal, and Baylor Klein advised Deciem. The transaction is expected to close in the second quarter of this year.
Photos Credit: Courtesy
Source: WWD